23/06/2010 by Arthur Childs.

The Chancellor’s proposals in the Coalition Government’s first Budget have been well publicised in various forms since he gave his Budget speech. However, based on past experience we have found that our clients and others have welcomed our summary of the proposals that will have a particular impact on financial planning.

This summary also includes comments where appropriate which we hope you will find helpful. To see a copy of our summary which you can download or print off please visit our website www.arch-fp.co.uk. Some of these proposals may change before they are enacted. However, it is important that financial plans are reviewed in the light of the likely changes.

These Budget notes are intended as a guide only. The information given is based on our understanding of the Chancellor’s proposals. Whilst we believe our interpretation of the proposals to be correct, we cannot be responsible for the effects of any future legislation or any change in interpretation or treatment. You should not make changes to your financial planning on the strength of these Budget notes but talk through your personal situation with an independent financial adviser such as ourselves. Please note that this information does not constitute personal advice and should not be treated as a substitute for specific advice based on your circumstances.

If you would like to discuss any aspect of your investments, pensions or your financial planning generally, please ask your usual Arch adviser, telephone 01483 204600 or email enquiries@arch-fp.co.uk.

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08/06/2010 by Arthur Childs.

The first budget of the new coalition Government is due in just two weeks, on 22 June. Prime Minister David Cameron has warned of “difficult decisions on pay, pensions and benefits”. He has not unexpectedly stated that the situation is “even worse than we thought” and “because the legacy we have been left is so bad, the measures to deal with it will be unavoidably tough.” 

So we cannot say that we have not been warned!

Rise in Capital Gains Tax

There have also been very clear statements that taxes will need to rise substantially, and particularly of concern to investors, big and small, is the prospect of a rise in capital gains tax from a flat 18% to fall in line with the income tax levels, currently 20%, 40% and 50%. As CGT is added onto a person’s income in the year that the gain is taken, a basic rate tax payer could suddenly find themselves paying 40% tax on a large gain. To make things worse we know that the LibDems had wanted to reduce the annual CGT exempt amount from its current £10,100 down to £2,500.

David Cameron has been at pains to try and put investors’ minds at rest and there does seem to be the possibility of the re-introduction of some form of taper relief so that long term investors have some relief from gains partly caused by inflation. There has also been talk of special reliefs for investors who are age 65 and over. Will the new rules start from 6 April 2011 to give investors time to carry out some tax efficient rearrangements of their portfolios, or will the changes be immediate or even backdated to the start of this tax year? The latter would be a nightmare for HMRC. The truth is that we simply do not know and it is even possible that these things have not finally been settled by the Chancellor as I write this.

The majority of investors have money in assets that can be caught for CGT such as unit trusts, OEICs and direct shareholdings. We cannot recommend taking drastic action, such as the wholesale selling of portfolios, because we do not know what the new rules will be and any action you take blindly, as it were, could make the situation worse. Married investors might, however, want to make sure that investment portfolios are fairly equally divided between them by possibly transferring some assets into their spouse’s name. Such transfers between married couples are not deemed to be a sale so that the original cost and gain is transferred across untouched. This allows maximum use of both CGT annual exempt amounts on an eventual sale.

All Investors Should Consider This

There is, however, one thing that all investors should consider right now and that is to use up their investment ISA allowance before the Budget. We do not expect the ISA allowance to be removed, it may well be increased, but it is a way of moving money into a CGT free environment and is therefore a prudent course of action.

If you are an existing client and have money in unit trusts and OEICs on a platform such as Nucleus, Cofunds or FundsNetwork, then simply email or telephone us and we will email you a switch form to move up to £5,100 or £10,200 (if you do not also wish to use Cash ISAs this year) into the appropriate ISA account. Please remember that these amounts are per individual so that a couple can move a total of up to £10,200 or £20,400 out of harm’s way.

If you are not an existing client or your investments are not held on a platform then it may be too late to get any switch into an ISA completed before the Budget, but we are still happy to talk through your options with you.

Please note that this information does not constitute personal advice and should not be treated as a substitute for specific advice based on your circumstances. If you are thinking about investing in an ISA then you should discuss the matter with a suitably qualified independent financial adviser such as ourselves.

If you would like to receive advice about switching some of your investments into an ISA or investing directly into an ISA, please ask your usual Arch adviser, telephone 01483 204600 or email enquiries@arch-fp.co.uk.

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